Two-thirds of U.K. multiemployer plan providers believe that October's launch of an authorization regime will reduce the number of master trusts to no more than 20 in the next five years, down from the 90 that currently operate, according to a survey by Pensions Management Institute.
The survey, conducted in July and August, found that a fifth of those surveyed expect the number of master trusts to drop to 25 to 30, while 13% thought 40 will exist in five years. Some 87% of participants in the survey said that authorization would accelerate consolidation. The authorization requirement is designed to weed out inadequately governed master trusts. To discourage poorly run master trusts from operating multiemployer plans must pay a fee, set by The Pensions Regulator, to continue to operate.
As of the end of November, 54 master trusts had not yet declared if they will apply to stay in the market, said David Fairs, TPR's executive director for policy. But he said the regulator is expecting all of them to apply for the authorization.
Some 32 master trusts already have stated they will not be applying and three have wound down, according to Mr. Fairs, who spoke at the Pensions Management Institute's DC symposium Wednesday.
"We believe there is enough capacity to absorb all of these (assets of) master trusts that are not going to go through (the authorization process) or decided to wind down," Mr. Fairs said.
"We are looking at different ways to get through to the smaller master trusts," he said. "They don't necessarily think that TPR's regulation is meant for them."
Nearly a third of the master trusts surveyed by the PMI said trustees do not possess the right balance of commercial and DC experience required to run a master trust. Some 73% of respondents said there is a shortage of DC skills at the regulator.
All the respondents agreed the master trust authorization regime was a "good thing." When asked about the level of advice and guidance needed, 53% agreed that rules on advice and guidance impede the delivery of services to participants, PMI's survey said.
